(c) Application of Proceeds and Payments. Any payments received at any time by Lessor or by Lessee from any insurer under insurance (other than Excluded Payments), or from any Governmental Entity or other Person with respect to a Casualty Occurrence will be applied as follows:



 (i) unless clause 11(c)(ii) below is applicable, so much of such payments as shall not exceed the Casualty Value required to be paid by Lessee pursuant to Section 11(a) of this Lease shall be paid to or as directed by Lessor in reduction of Lessee's obligation to pay such Casualty Value if not already paid by Lessee, or, if already paid by Lessee (unless an Event of Default shall have occurred and be continuing) shall be applied by Lessor to reimburse Lessee for its payment of such Casualty Value and the balance of such payment, if any, remaining thereafter, if such payment is received with respect to insurance other than liability insurance (unless an Event of Default shall have occurred and be continuing) shall be paid over to, or retained by Lessee; or



 (ii) if such payments are received as a result of a Casualty Occurrence with respect to an Engine which is being replaced by Lessee with a Replacement Engine pursuant to Section 11(b) hereof, unless an Event of Default shall have occurred and be continuing, all such payments shall be paid over to, or retained by, Lessee if Lessee has fully performed or, concurrently therewith will fully perform, the terms of Section 11(b) and of Section 15 hereof with respect to the Casualty Occurrence for which such payments are made.